After having made headlines for the majority of 2019, DeFi seems to be losing some steam, as the number of ETH locked up in DeFi contracts is on a sharp downwards trend in recent weeks. For example, the total ETH locked in the MakerDAO ecosystem has declined sharply from about 2.1 million ETH at the peak to less than 1.6 million ETH at last count.
We have looked at DeFi in our earlier editions (here,here and here). The emerging DeFi ecosystem has the potential to disrupt the traditional financial services industry as we know it. One reason why we are witnessing a decline in the amount of ETH staked in DeFi could be Bitcoin’s strong outperformance that has likely led to capital moving out of the Ethereum ecosystem into Bitcoin, and indeed back into Ethereum itself, that is also experience a run-up, given its historic correlation with BTC.
Also, the other important factor is the media-sensitivity of crypto. Over the past few weeks, other critical themes have emerged to take center stage. With media bandwidth dominated by Libra, India’s potential crypto ban, and the FATF regulations on exchanges, crypto, or at least BTC, is rescaling heights last seen in 2017. Some technical analysts reckon this might be a run up all the way to 20k. Anecdotally, we can confirm that retail FOMO is slowly coming back, but more importantly, more and more institutions are now being forced to seriously consider crypto as an asset class that is critical to their portfolio.